Either the straight-line method or the effective-interest method of amortization will
always result in
a. the same amount of interest expense being recognized over the term of the bonds.
b. the same amount of interest expense being recognized each year.
c. more interest expense being recognized than if premium or discounts were not
amortized.
d. the same carrying value each year during the term of the bonds.
Answer:
Stockholders’ equity is decreased by
a. assets.
b. revenues.
c. expenses.
d. liabilities.
Answer:
Which of the following factors does not affect the initial market price of a stock?
a. The company’s anticipated future earnings
b. The par value of the stock
c. The current state of the economy
d. The expected dividend rate per share
Answer:
The date a cash dividend becomes a binding legal obligation to a corporation is the
a. declaration date.
b. earnings date.
c. payment date.
d. record date.
Answer:
Indicate where the event purchase of land and a building with a mortgage would appear,
if at all, on the indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Answer:
Which of the following is false about a journal?
a. It discloses in one place the complete effects of a transaction.
b. It provides a chronological record of transactions.
c. It helps to prevent or locate errors because debit and credit amounts for each entry
can be readily compared.
d. It keeps in one place all the information about changes in specific account balances.
Answer:
On the statement of cash flows using the indirect method, patent amortization expense
will
a. be added to net income in the operating section.
b. be deducted from net income in the operating section.
c. appear as an inflow of cash in the investing section.
d. appear as an outflow of cash in the investing section.
Answer:
Gross profit does not appear
a. on a multiple-step income statement.
b. on a single-step income statement.
c. to be relevant in analyzing the operation of a merchandiser.
d. on the income statement if the periodic inventory system is used because it cannot be
calculated.
Answer:
If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons,
a. total depletion on the mine is based on the 1,200,000 tons.
b. depletion expense is recognized on the 1,500,000 tons extracted.
c. depletion expense is recognized on the 1,200,000 tons extracted and sold.
d. a separate accumulated depletion account is set up to record depletion on the 300,000
tons extracted but not sold.
Answer:
Goodwill can be recorded
a. when customers keep returning because they are satisfied with the company’s
products.
b. when the company acquires a good location for its business.
c. when the company has exceptional management.
d. only when there is an exchange transaction involving the purchase of an entire
business.
Answer:
Hernandez Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1, 2015,
at 98. The journal entry to record the issuance will show a
a. debit to Cash of $2,000,000.
b. credit to Discount on Bonds Payable for $40,000.
c. credit to Bonds Payable for $2,040,000.
d. debit to Cash for $1,960,000.
Answer:
An account is an individual accounting record of increases and decreases in specific
a. liabilities.
b. assets.
c. expenses.
d. assets, liabilities, and stockholders’ equity items.
Answer:
IFRS requires that companies present
a. a complete set of financial statement, including comparative information, annually.
b. only a statement of financial position, including comparative information, annually.
c. only an income statement, including comparative information, annually.
d. only a statement of changes in cash flows, including comparative information,
annually.
Answer:
Equipment is classified in the balance sheet as
a. a current asset.
b. property, plant, and equipment.
c. an intangible asset.
d. a long-term investment.
Answer:
Pixies Inc. pays its rent of $54,000 annually on January 1. If the February 28 monthly
adjusting entry for prepaid rent is omitted, which of the following will be true?
a. Failure to make the adjustment does not affect the February financial statements.
b. Expenses will be overstated by $4,500 and net income and stockholders’ equity will
be understated by $4,500.
c. Assets will be overstated by $9,000 and net income and stockholders’ equity will be
understated by $9,000.
d. Assets will be overstated by $4,500 and net income and stockholders’ equity will be
overstated by $4,500.
Answer:
Selected data from Decco Company are presented below:
Instructions
Calculate the profitability ratios that can be computed from the above information.
Answer:
When the allowance method is used to account for uncollectible accounts, the
______________ is credited when an account is determined to be uncollectible.
Answer:
Corporations purchase investments in debt or stock securities generally for one of two
reasons.
Answer:
The Vogelson Company accumulates the following cost and market
data at December 31.
What is the lower-of-cost-or-market value of the inventory?
Answer:
On January 2, 2015, Kerwin Company purchased a patent for $48,000. The patent has
an estimated useful life of 25 years and a 20-year legal life. What entry would the
company make at December 31, 2015 to record amortization expense on the patent?
Answer:
On January 1, 2015, Morris Enterprises issued 9%, 5-year bonds with a face amount of
$900,000 at par. Interest is payable semiannually on June 30 and December 3
Instructions
Prepare the entries to record the issuance of the bonds and the first semiannual interest
payment.
Answer: